Kazakhstan Inflation December 2016

Kazakhstan: Inflation falls to 15-month low in December

January 4, 2017

Consumer prices in Kazakhstan rose 0.9% from the previous month in December, which came in below the 1.2% increase observed in November. December’s result stemmed from a slowdown in most price categories, with the exception of furnishing, recreation and transport, which saw faster increases over the previous month.

Inflation fell from 8.7% in November to 8.5% in December, the lowest rate since September 2015. The reading also came in well below the 13.6% rate seen at the end of 2015. Inflation began to fall abruptly from October 2016 due to a base effect and is expected to continue falling in the coming months, although at a slower pace, as the base effect fades. Due to the rapid fall in inflation and inflation expectations, the National Bank of Kazakhstan announced a further cut in the monetary policy rate at its last meeting of 2016. The Central Bank has cut interest rates by a cumulative 500 basis points this year.

As the economy adapts to new economic conditions, namely a more stable exchange rate and rising oil prices, the trend confirms that inflation is decelerating. Annual average inflation fell from 15.1% in November to 14.7% in December.

After falling to just above the upper ceiling of its target range of between 6.0% and 8.0% in 2016, the National Bank of Kazakhstan expects inflation to fall to within the target range in 2017. FocusEconomics Consensus Forecast panelists expect inflation to end 2017 at 6.8%, which is up 0.1 percentage points from the previous month’s forecast. By the end of 2018, our panel expects inflation to fall to 5.8%.

Author:Ricardo Aceves, Senior Economist

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At its 21 August monetary policy meeting, the National Bank of Kazakhstan (NBK) decided to lower the one-day repo rate—also known as the base rate—from 10.50% to 10.25% with a window of plus or minus 1% as inflation continued to decelerate and prices across commodity markets stabilized.